An aggressive two-week rally came to a quiet thud Monday on Wall Street, in a light-volume selloff triggered by the familiar fears that Europe was far from solving its sovereign debt crisis.
Stocks finished well off their lows for the day, but it was still good enough for a 160-point drop in the Dow and an equally tough day for tech stocks.
Financials, materials and energy led the Standard & Poor's 500and Dow industrialslower, while the Nasdaq tech gauge took a hit as semiconductors slumped nearly 4 percent.
The culprit: Investors worried that a much-touted summit Friday of European leaders was yet another exercise in futility, with no long-term solution in place to take care of the sovereign debt crowding national balance sheets.
"It appears that Europe’s nightmare has not gone away after all, with investors rethinking Friday’s immediately positive response," Andrew Wilkinson, chief economist strategist at Miller Tabak, said in his morning note. "The single euro currency is once again trawling the depths of despair as investors weigh the prospect of further interest rate cuts as further reason to take pot shots at the unit."
Losses were concentrated most heavily in cyclical stocks, with consumer sectors suffering the least damage though all 10 S&P 500 sectors were negative. The KBW Bank Index tumbled 2.5 percent. Citigroup was the sector's biggest loser.
All but two of the 30 stocks in the Dow industrials fell, with economic bellwether Caterpillar helping to lead the way lower, though even its substantial losses were dwarfed by those at big financials Bank of America and JPMorgan Chase . Disney and McDonald's were the only two bluechips to finish in positive territory.
On the positive side in financials, insurer SunLife Financial rose after it released a four-pronged growth plan, and UBS upgraded the company to a buy.
Volume was an anemic 760 million shares on the New York Stock Exchange, indicating traders already have begun to hit the exits for the holidays.
"We're in a seasonal period where we should be having a nice Santa Claus rally, and we're not. We're running out of time for it to take hold," said Keith Springer, president of Springer Financial Advisory in Sacramento, Calif.
Policymakers "refuse to give the market what it wants, and that's a little bit of comfort that they know what's going on and they're in control," he added. "What's making the market so uneasy is they don't know what's going on and they're not in control."
In company news, Onyx Pharmaceuticals shares tumbled after the Food and Drug Administration said it would not place the firm's application for approval of myeloma drug, known as c-mib, on priority review.
Canaccord Genuity and BMO both lowered price targets for Onyx.
Intel shares plunged after the firm cut its profit outlook and UBS lowered its view on the company for the first quarter in 2012. The stock led the Nasdaq tech barometer lower, with the Dow Jones semiconductor index down 3.5 percent.
On the plus side, Martin Marietta has proposed a combination with Vulcan Materials in a stock-for-stock exchange, sending shares of both companies higher.
Across other markets, oil and precious metals such as gold and silver are sharply lower, while Treasurys are mixed. The US dollar rose against the euro. Volume was light, with just 350 million shares changing hands on the New York Stock Exchange by 2 pm. Losers beat gainers more than 4 to 1 both on the NYSE and the Nasdaq.
Elsewhere Abu Dhabi's Etihad Airways said in a statement on Monday it will buy 12 planes from Boeing including 10 787-9 Dreamliners, in a deal valued at $2.8 billion at current list prices. Boeing shares dropped, even though Morgan Stanley upgraded the stock to overweight.
ConocoPhillips has made a gas find in the southern North Sea near BP's Ula oil and gas field, the Norwegian Petroleum Directorate said on Monday, but more tests are needed to see if the shallow-water discovery is worth developing.
European shares fell 1.3 percent weighed by concerns over politicians' response to the debt crisis in the short-term and the likely impact of austerity measures on economic growth.